Taxes on Real Estate in Turkey
The Tax income in Turkey is applied depending on the current situation of the citizen. Turkish citizens are required to pay their taxes on their worldwide income however foreign residents in Turkey are required to pay the taxes of their revenues gained in Turkey.
How foreigners liable to income tax in Turkey:
The taxes apply depending on whether the foreigner is registered as a Turkish resident or not. In these cases different laws are applied:
⦁ Foreigner as a Turkish resident for tax purposes: In this case, the residents are taxed on their global income. Residents for tax purposes are those who obtained a residence in Turkey and stayed more than a six months period in any one tax year and by that, they are required to pay their taxes on any income they have.
⦁ Foreigner as a non-Turkish resident for tax purposes: In this case, foreigners are required only to pay their taxes on their income gained from a business operating in Turkey or real estate property in Turkey. It is called limited Taxpayer status
Taxes on real estate in Turkey:
When foreigners purchase a property in Turkey they are required to pay some taxes, their attorney must notice them with this matter. Here is a glance at the types of taxes for foreigners:
1. The stamp duty Tax: IT is payable when the property owner changes ownership of his/her property at the registration of the title deed. It is paid by both parties the owner and the new buyer and calculated as 4.4% of the real estate declared amount.
2. Annual property tax: The tax is between 0.6%and 1% of the property value which is a very small tax compared to other countries that require taxes on properties.
3. Tax of income from real estate: A tax paid on the profit gained from selling a property which is called Capital gains tax or from renting it and called a tax on rental income. It varies from 15% to 30%.
- A capital gain: Once the property owner sells the property, there is a tax implied on the profit gained. It is calculated on the difference between the declared property price at buying and the declared property price at selling.
For example: If a foreign investor buys a property in Turkey in 2015 for 130.000$ (the price declared at title deeds is 100.000$), then after few years the buyer decides to sell his/he property for 170.000$ (the selling price declared is just 120.000$). The profit gained from sales depending on the declared prices is 20.000$. According to the Turkish law for capital gains tax, any profit gained between 6000 Tl and 40.000tl after selling a property is input for a tax.
Note: According to the Turkish Taxation Law, property owners are not liable to pay any capital gains taxes after owning the property for 5 years.
- Tax on Rental Income: It is implied on the income gained from the rental of the property, the tax amount is calculated after deducting the maintenance fees. The amount undergoes an annual exemption as well and the tax varies between 15% and 35% for net income above 40.000tl.
Comparing to other countries Turkey has one of the lowest tax rates for foreign investors. For instance, European countries like Swissland, Italy, France, and Austria have the highest property tax on rental income. Property owners there are taxed between 25% and 40% and are not exempted from any annual additional taxes.